Let’s Talk Audits


Coding a chart is like a puzzle. Putting the pieces together accurately from a medical record, illustrates a patient’s unique health picture. Solving individual coding puzzles offers every patient a voice and an opportunity for the best quality of care.

Centauri Health Solutions’ Director of Coding Services- Monica Watson

To say that Monica Watson is passionate about all things coding, would be a huge understatement. As Centauri’s Director of Coding Services, Monica Watson, has more than 15 years of hands-on experience leading coding and auditing operations for Medicare and commercial Risk Adjustment and Facility coding. She has created and maintained coding best practices for diagnosis coding abstraction in ICD-9-CM and ICD-10-CM and has designed and implemented Initial Validating Auditor programs.

As a trusted member and partner, Ms. Watson recently teamed up the American Health Information Management Association (AHIMA) as well as with Sharon Easterling from Recovery Analytics, LLC, to create a series of articles focused on auditing medical record coding best practices. Below, we have reprinted the article in full, with permission from AHIMA. 

An Inside Look at HCCs and Risk Adjustment Data Validation: Part 1

By Monica Watson, RHIA, CPC, CCS, CCS-P, CPMA, CIC, CRC, and Sharon Easterling, MHA, RHIA, CCS, CDIP, CRC, FAHIMA

Regulatory audits come in all shapes and sizes. From the Office of Inspector General (OIG) to Recovery Audit Contractors (RAC), to Zone Program Integrity Contractor (ZPIC), to Risk Adjustment Data Validation (RADV), each audit has a core objective: to ensure proper payments. The most common audits are coding audits and medical necessity audits, where the audit places the burden of proof on the claim’s submitter to demonstrate the coding is accurate and the condition is supported. Best practice encourages organizations to get it right before it goes out the door and incorporate monitoring through internal audit programs that mitigate risk of financial penalties. This article will focus more specifically on the RADV audit program.

Health plans and provider groups that participate in Medicare Advantage and/or Health Insurance Exchange (HIX) lines of business conduct coding activities to abstract and submit diagnosis codes. HIX lines of business are those seen within the Affordable Care Act (ACA) initiative. Many of those diagnosis codes are associated with a Hierarchical Condition Category (HCC) which, through detailed calculations, determine a level of reimbursement associated to the risk of the member


The Centers for Medicare and Medicaid Services (CMS)-RADV and the Department of Health and Human Services (HHS)-RADV audits use different coding models—CMS-HCCs and HHS-HCCs—to capture population complexity and severity. The Medicare CMS-HCCs were adapted into the HHS-HCCs risk adjustment and are also used within some other Alternate Payment Models (APMs) and Advanced Alternate Payment Models (Advanced APMs). Prediction year, population, and type of spending are key determinants within each model, as detailed in a 2014 article published in the Medicare & Medicaid Research Review, “The HHS-HCC Risk Adjustment Model for Individual and Small Group Markets under the Affordable Care Act.”

To ensure proper coding practices, CMS conducts two audit programs to validate the HCCs submitted. The ICD-9-CM and ICD-10-CM Official Coding Guidelines, AHA Coding Clinic, and CMS’s Participant Guide are the key references for acceptable documentation and coding.


CMS-RADV for Medicare Advantage audits are conducted annually. There are two types of audits. The first is a National Sample consisting of a smaller grouping of members. National Sample audits do not have financial impact, but assist in calculating an error rate. The larger, more intensive audit is a Targeted audit. This is a random sample of 201 members and plans selected on a random basis for participation each year. It is entirely possible for a plan to be selected every year, or every couple of years. The premise of the CMS-RADV is that it places the burden of proof on the plan to produce a valid face-to-face encounter health record document to support the HCC that was submitted and reimbursed. A checklist provided by CMS may be helpful in understanding the aim of a CMS-RADV audit.

HIX Audits

Each participating plan is required to participate annually in a Health Insurance Exchange audit (HIX), or HHS-RADV audit, with a 200-member sample per plan, per year. The current audit is looking at date of service year 2016 and is the first to include a financial impact. HHS-RADV audits require the plan to supply a valid health record associated with the claim submitted, which in turn must support the submitted HCC. The HIX program is intended to be budget-neutral, and plan performance in the audit will determine payments owed to competing plans.


RTI International. “Evaluation of the CMS-HCC Risk Adjustment Model: Final Report.” Baltimore, MD: Centers for Medicare & Medicaid Services, March 2011. Available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/downloads/evaluation_risk_adj_model_2011.pdf.

Centers for Medicare and Medicaid Services (CMS), Department of Health and Human Services Risk Adjustment Methodology Overview. Presented at the Health Insurance Exchange System-Wide Meeting: CMS, May 21-23, 2012. Available at https://www.cms.gov/CCIIO/Resources/Presentations/Downloads/hie-risk-adjustment-methodology.pdf.
Monica Watson (monicam3@me.com) is a director of coding services at Centauri Health Solutions. Sharon Easterling (sharon@recoveryanalyticsllc.com) is president at Recovery Analytics, LLC.

Look for Part 2 on this topic this summer, discussing HHS-RADV audits, also known as initial validation audits (IVA).
This article was published in AHIMA’s monthly CodeWrite newsletter—a benefit of AHIMA membership.


 About Centauri Health Solutions

Centauri Health Solutions focuses on revealing care opportunities through its suite of products and services. Delivering data-driven services, through private cloud-based software solutions, the firm provides comprehensive data management designed specifically for risk adjustment and quality-based revenue programs, in addition to enrollment and eligibility solutions. Centauri improves member outcomes and financial performance for health plans, hospitals and at-risk providers by supporting initiatives in health care enrollment, risk adjustment, RADV risk mitigation, HEDIS and Star Ratings. Headquartered in Scottsdale, Ariz., Centauri Health Solutions also has offices in Cleveland, Ohio, Nashville, Tenn., and Orlando, Fla. For more information, visit www.centaurihs.com.